Jumbo SA Corporate Bonds and Leverage Analysis
| 5JB Stock | EUR 24.22 0.42 1.70% |
Jumbo SA has over 199.52 Million in debt which may indicate that it relies heavily on debt financing. . Jumbo SA's financial risk is the risk to Jumbo SA stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Jumbo SA's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Jumbo SA's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Jumbo Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Jumbo SA's stakeholders.
For most companies, including Jumbo SA, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Jumbo SA, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Jumbo SA's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Jumbo |
Given the importance of Jumbo SA's capital structure, the first step in the capital decision process is for the management of Jumbo SA to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Jumbo SA to issue bonds at a reasonable cost.
Jumbo SA Debt to Cash Allocation
Many companies such as Jumbo SA, eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
Jumbo SA has accumulated 199.52 M in total debt with debt to equity ratio (D/E) of 18.1, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Jumbo SA has a current ratio of 5.26, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist Jumbo SA until it has trouble settling it off, either with new capital or with free cash flow. So, Jumbo SA's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Jumbo SA sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Jumbo to invest in growth at high rates of return. When we think about Jumbo SA's use of debt, we should always consider it together with cash and equity.Jumbo SA Assets Financed by Debt
Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Jumbo SA's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Jumbo SA, which in turn will lower the firm's financial flexibility.Jumbo SA Corporate Bonds Issued
Most Jumbo bonds can be classified according to their maturity, which is the date when Jumbo SA has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Understaning Jumbo SA Use of Financial Leverage
Jumbo SA's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Jumbo SA's total debt position, including all outstanding debt obligations, and compares it with Jumbo SA's equity. Financial leverage can amplify the potential profits to Jumbo SA's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Jumbo SA is unable to cover its debt costs.
Jumbo S.A. engages in the retail of toys, baby products, gift articles, household products, stationery, seasonal and decoration items, books, and related products. Jumbo S.A. was founded in 1986 and is headquartered in Athens, Greece. JUMBO S operates under Leisure classification in Germany and is traded on Frankfurt Stock Exchange. It employs 5612 people. Please read more on our technical analysis page.
Currently Active Assets on Macroaxis
Other Information on Investing in Jumbo Stock
Jumbo SA financial ratios help investors to determine whether Jumbo Stock is cheap or expensive when compared to a particular measure, such as profits or enterprise value. In other words, they help investors to determine the cost of investment in Jumbo with respect to the benefits of owning Jumbo SA security.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.